Question 1: Is Ms. Casey really asking if the agency caved? Probably not, but if so, that is interesting.

“Republican Commissioner Kathleen Casey questioned the SEC staff Thursday on their decision to abandon the strongest fraud charge and strike a settlement involving a lesser allegation, and given that, how the SEC could justify such a large penalty on a lesser charge.”

Question 2: Is Russell Ryan saying that the SEC did not have enough proof to charge Goldman with intentional fraud rather than giving incomplete information? After all, the fraud has been public knowledge for some time. Why did the SEC cave?

“Russell Ryan, a former SEC enforcement lawyer, said the negotiation to drop the strongest fraud charge is “usually a strong indication the SEC had some doubt whether it could prove intentional fraud. Mr. Ryan, now a defense lawyer at King & Spalding, said the SEC typically insists a defendant settle on the strongest allegation made in its complaints. Watering down the toughest charge, as in this case, is unusual.”

Question 3: Why would the fraud charges be dropped in the course of negotiations with Goldman?

“The SEC initially alleged that Goldman violated a rule — known as Rule 10b of securities laws — which contains a sweeping antifraud provision covering trading in securities. The charge is one of the most serious the SEC can make, and carries greater stigma for a financial firm than the lesser charge included in the settlement. The lesser charge Goldman settled on comes under a rule known as 17a. These charges can involve intentional and unintentional fraud, as well as negligence. The SEC staff, led by Kenneth Lench, head of the agency’s structured-products unit, told the commission the shift stemmed from the settlement negotiations, a person familiar with the matter said.”

Question 4: The SEC suggests that lessening the charge did not make the offenses less serious. Then why lessen the charges?

“Lorin Reisner, deputy director of the SEC’s enforcement division, said “Section 10b and Section 17a1 are functional equivalents. Section 17a1 is a more appropriate claim in the context of a fraud in connection with the offering of securities.” He declined to comment on why the agency dropped the 10b charge.

Question 5: How can anybody believe that the SEC did not cave?

“The division in the settlement vote casts a cloud over what the SEC had claimed on Thursday was a major victory. Investors had expected any SEC fine in the case to be $1 billion or more. Goldman’s shares have jumped since Thursday.”

Question 6: Did Goldman hit a home run?

“Combining a settlement of the SEC suit with a resolution of related SEC probes could calm Goldman’s restive clients and investors, while shielding the firm from information that could be used against Goldman in private litigation. Goldman’s paramount concern was removing the more serious fraud charge rather than knocking down the size of the fine, say people familiar with the matter.”

Question 7: Why would the SEC be upset about Goldman leaving the cat out of the bag?

“On Wednesday, upon learning The Wall Street Journal was preparing an article on catch-all settlement talks, SEC enforcement chief Robert Khuzami grew furious and blasted Goldman. He accused the firm of leaking a story that suggested Goldman had bested the SEC, a person familiar with the matter says.”

Last question: How many staffers is Goldman going to hire and how many Goldmanites will join the SEC?